King v. LSF9 Master Participation Trust, CV 17-172-M-DLC-JCL
| Decision Date | 20 June 2018 |
| Docket Number | CV 17-172-M-DLC-JCL |
| Parties | DAVID P. KING, JR., Plaintiff, v. LSF9 MASTER PARTICIPATION TRUST, Defendant. |
| Court | U.S. District Court — District of Montana |
Before the Court is the Fed. R. Civ. P. 12(c) motion for judgment on the pleadings filed by Defendant U.S. Bank, N.A., as Trustee for LSF9 Master Participation Trust ("U.S. Bank"). Also before the Court is Plaintiff David King, Jr.'s subsequent Fed. R. Civ. P. 15 motion for leave to file an amended complaint. For the reasons discussed, the Court grants King's motion to amend and, therefore, recommends U.S. Bank's motion be denied with leave to renew.
On December 15, 2017, King commenced this action by filing his complaint. He was appearing in this action and prosecuting his claims pro se at that time.
King resides on his private property in Darby, Montana, which he purchased in approximately 2001. He later commenced construction of a new home on the property, and to do so he obtained a construction loan secured by a deed of trust encumbering his real property. Due to construction complications and cost overruns, King refinanced the construction loan and the balance on the debt grew. The new loan and promissory note that is apparently the subject of this action was originally stated as a loan in the amount of $350,000.
King apparently was not able to continue making the required loan payments after December, 2008. By March, 2009, the trustee on the deed of trust sought to foreclose and sell King's property, but the foreclosure did not occur.
In March, 2011, King filed for bankruptcy. At that time OneWest Bank, FSB asserted it was the secured creditor relative to King's promissory note.
In September, 2016, King received a notice indicating that LSF9 Master Participation Trust had become the owner of the subject loan. But, at the same time, King had been informed that Fannie Mae held ownership of the subject promissory note.
Through King's bankruptcy proceedings OneWest and Fannie Mae eventually disavowed ownership of King's promissory note. LSF9 Master Participation Trust remained as the purported owner of the note.
But through this action King asserts LSF9 Master Participation Trust is not the owner or holder of the promissory note that King signed. He believes the actualcreditor on the promissory note is OneWest Bank. Consequently, King's original complaint requests a declaratory judgment establishing that LSF9 Master Participation Trust is not the "Note Holder", is not entitled to receive loan payments, and does not possess the rights to enforce either the promissory note or the deed of trust. He further alleges LSF9 Master Participation Trust has falsely claimed ownership of the promissory note, allegedly in violation of federal law at 15 U.S.C. § 1602(g), and that it provided him with an inaccurate address for its business, allegedly in violation of 15 U.S.C. § 1641(g). Thus, he also requests an award of compensatory and punitive damages.
In response to King's complaint U.S. Bank, as Trustee for LSF9 Master Participation Trust, filed a Fed. R. Civ. P. 12(c) motion for judgment on the pleadings. In substance, it argues that the existing transaction documents of which the Court can take judicial notice establish that the creditor rights under King's promissory note have been assigned to LSF9 Master Participation Trust. And it argues the federal statutes on which King relies do not provide him with a legal cause of action. Therefore, it requests the Court dismiss King's complaint.
On May 3, 2018, King filed a Notice of Appearance reflecting that he retained legal counsel to represent him in this action. On that same date King's new counsel filed a Motion for Leave to File a First Amended Complaint underauthority of Fed. R. Civ. P. 15.
King's proposed amended complaint, as later revised and resubmitted to the Court on May 30, 2018 (doc. 36-2), contains many of the same factual allegations set forth in King's original complaint. King asserts the chain of documents allegedly assigning ownership of the promissory note to LSF9 Master Participation Trust is defective.
King's proposed amended complaint advances various legal claims for relief predicated primarily upon his theory that LSF9 Master Participation Trust, contrary to its representations to King, is not the current owner of King's promissory note, and does not have the authority to enforce either the note or the related deed of trust. King's proposed claims assert LSF9 Master Participation Trust is liable for negligent misrepresentation, constructive fraud, unfair and deceptive practices, and for violations of the Fair Debt Collection Practices Act at 15 U.S.C. §§ 1692f(6) and 1692k. He requests an award of compensatory and punitive damages, and an award of his attorney's fees.
King's allegations in both his original complaint and his proposed amended complaint invoke the Court's federal question jurisdiction under 28 U.S.C. § 1331. And pursuant to 28 U.S.C. § 1367(a), the Court possesses supplementaljurisdiction over King's claims advanced under Montana law.
King's motion for leave to file an amended pleading is filed under authority of Fed. R. Civ. P. 15 which permits a party to amend a pleading with the Court's leave, and "[t]he court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a). Rule 15 embodies a liberal policy in favor of granting a party leave to amend, and leave "should be granted unless amendment would cause prejudice to the opposing party, is sought in bad faith, is futile, or creates undue delay." United States v. Gila Valley Irrigation District, 859 F.3d 789, 804 (9th Cir. 2017). And the determination of whether a litigant should be granted leave to amend is left to the discretion of the Court. Barahona v. Union Pacific Railroad Company, 881 F.3d 1122, 1134 (9th Cir. 2018).
The Court first notes that due to procedural circumstances in this case, a Fed. R. Civ. P. 16(b) scheduling order has not yet been imposed. Therefore, King's proposed amended pleading would not create an undue delay in this matter.
Next, U.S. Bank does not argue that King's proposed amended complaint would cause it prejudice, or that King seeks the amendment in bad faith. Therefore, the Court concludes those factors weigh in favor of allowing King's amendment.
U.S. Bank instead focuses its opposition to King's motion for leave to amend on its assertion that the proposed amendments would be futile. As noted,the Court may deny leave to amend if the proposed amendment is futile, but futility exists "only if no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense." Barahona v. Union Pacific Railroad Company, 881 F.3d 1122, 1134 (9th Cir. 2018).
U.S. Bank argues King's amended pleading is futile on the basis that it could later be defeated through a dispositive motion. Specifically, U.S. Bank continues to argue that the chain of transaction documents establish that it is, in fact, the creditor on King's subject promissory note. U.S. Bank submitted the affidavit of Jaime Guevara, an employee of the third-party entity that services loans on behalf of U.S. Bank. Guevara states U.S. Bank is in possession of the subject promissory note King signed, and identifies the note as that which is attached to the affidavit. (Doc. 35-1.) Thus, U.S. Bank asserts it holds King's promissory note, and that it possesses the right to enforce the note and foreclose on King's real property securing the note, thereby rendering all of King's claims for relief futile.
In reply, King challenges the authenticity of the promissory note attached to Guevara's affidavit. Specifically, King alleges in his...
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